Why should CIOs look at startup technology companies?

The UK technology startup scene has seen a growth spurt in recent years, providing innovative
ideas in emerging sectors, such as cloud, mobile, social media and IT consumerisation.

There has been plenty of publicity for consumer-focused startups developing apps for mobile or
social networks, but there is also a blossoming environment for business-to-business tech startups
with products that could bring benefits to corporate IT departments.

CIOs are constantly looking for innovation to solve their IT problems and enhance their
business, but with so many startup companies entering the market, IT leaders often find it
difficult to sift through all the options, with not enough time to research and learn about
potential suppliers.

Additionally, while many startups are known for their great ideas, they are not always known for
being great at sales and marketing. Many startups hit roadblocks when trying to approach big
companies with often complex procurement processes.

Why CIOs should look to startups

Startup companies tend to have a specialised expertise which can make them appropriate for large
organisations.

One of the benefits of choosing to work with a young company is that businesses may be able to
mould and help develop a solution to fit their problems. Startups are flexible with their concepts
as they are not set in stone like many traditional IT suppliers.

Ollie Ross, head of research at IT leadership group The Corporate IT Forum, said: “A small
startup specialist company is more willing to look at a problem or challenge and develop a specific
solution to meet an organisation’s needs. With larger established suppliers, sometimes it is the
case that they see an opportunity to fit the user problem to an existing solution.”

Connecting companies

While a small firm might hold the answer to corporate IT challenges, finding the right companies
to work with is a challenge in itself.

“It’s challenging [for startups] to get visibility and access,” said Alistair Grant, CIO for
Europe, Middle East and Africa at financial services giant Citi. “I get so many calls a week, most
of which don’t even reach me, under my instructions.”

The UK government has recognised this, and backed London’s Tech City Investment Organisation - a
marketing initiative which aims to bring new companies and investors to the east of the capital,
while providing support to local startups seeking to expand.

There are many innovation hubs and accelerator programmes in the UK which support the startup
community. Some concentrate on connecting startups to money, investment, venture capitalists (VCs)
and entrepreneurs, and hence are less interested in connecting startups with potential
customers.

However, there are also other initiatives that are run by large firms, such as Accenture’s
Innovation Lab, Telefonica/O2’s Wyra Hub and KPMG’s Tech Group, that are a means to expose their
corporate clients to the ideas of technology startups.

These hubs provide corporations with the opportunity to meet small suppliers with a possible
solution in a neutral environment. Some of these small firms may have spent time trying to arrange
meetings with big businesses, but have been unable to gain their attention.

“[Being involved with a hub] plants both feet firmly inside the door, when previously you
struggled to get a toenail in,” said Rich Newton from startup Calltrunk, which was part of the
Accenture Innovation Lab. “You then leverage that to build commercial relationships.”

Giving newly formed companies direct access to some of their dream clients is key to the success
of such programmes, but companies and investors equally benefit from access to hand-picked products
which could potentially change their way of working.

“Investigating in technology and startups is absolutely essential,” said Citi’s Grant. “It keeps
our own people aware of what’s going on, on their toes and developing in a more agile way.”

Alessandro Hatami, COO of digital banking at Lloyds Banking Group said: “What’s very
useful is that the system has to filter these companies, which makes them more appropriate to what
we’re doing.”

Speaking the same language

Once a potential startup has been found and the initial meeting agreed, both corporate and
startup companies need to bring an open mind to the table.

Startups are at the beginning of a potentially exciting and profitable business. The majority of
startups are run by smart people, but they often lack experience of the protocols of large
corporations.

KPMG’s Tech Group helps connect existing corporate clients with startups. Tech Group lead Tim
Kay prepares his clients not to expect proposals from startups to be as polished as they are used
to.

“There’s a language barrier when they’re in a room together, that’s why we like to be involved,
because we can prime big corporations not to expect an IBM-type pitch. The startups are probably
four people trying desperately to sell a product the business probably needs,” he said.

Kay warns IT leaders that the sales pitch will be an “iterative and interactive process” and
that they will probably need to put different resources behind it.

Ross said that cultural differences are both a barrier and an opportunity.

“The comfort factor is not there, they’re not necessarily speaking the same language,” she
said.

“We’ve had quite a few decades where large IT users and supplier organisations have got used to
working together, with processes for meeting and measuring targets. However great the startup idea,
it’s a complete culture shock, you have to completely rethink how to manage that relationship.”

Ross said that while corporations speak in terms of business trends and strategies, startup
companies tend to talk about the specific technology they are developing.

Part of Kay’s role at KPMG is to act as a translator for each side. “Startups also need to
understand how a corporation buys. They think businesses are slow to react and bureaucratic, but
corporations just have a lot of hoops to jump through. Just because a VC says ‘that is a really
good idea’ doesn’t mean he’ll write you a cheque. It’s a process,” he said.

While a sales process can take 18 months to complete, Kay says they can halve this time by
helping communicate each company’s needs.

“It won’t happen overnight. Go in with your eyes wide open, knowing it’s not going to be quick,”
he said.

Working with startups can be a refreshing change of pace and can lead to corporations
approaching contracts differently, stepping away from the idea of a major deal for a large project.
“If you’re looking for a small, fast quickly delivered solution, you have an opportunity to break
these things down to small manageable chunks in terms of cost and size,” said Ross.

While there may be hundreds of startups in the UK for a CIO to choose from, the task of
connecting with a potential startup supplier can be a minefield. As long as corporates go into a
conversation with the right expectations, it is much more likely to proceed to fruitful
conversations.

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